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Debt consolidation loans enable individuals to combine several smaller debts into one loan, explains Financial Web. Since they typically have much lower interest rates than the loans to be consolidated, obtaining a debt consolidation loan usually results in a lowered monthly payment. The lower monthly payment helps individuals pay their bills on time, which leads to an improved credit score. The low interest rates also reduce the total amount an individual pays over the life of the loan.

Stress reduction is another possible benefit of debt consolidation loans. Taking out a debt consolidation loan often marks an end to harassment by debt collectors. Having just one monthly payment reduces stress for many individuals. Moreover, debt consolidation loans allows individuals to take control of their finances, leading to greater confidence over their future well-being, according to Nolo. However, this increased confidence may also lead individuals to take out additional debt before paying off the debt consolidation loan, resulting in a worse financial condition than before the consolidation.